One of our China lawyers got a client question the other day regarding the role their China WFOE must provide for China’s Communist Party within the WFOE. The client noted how the CCP’s charter states that any company with three or more party members must establish a party organization and how China’s Company Law also mandates that companies should provide for party activities. The client then noted that its WFOE had one employee who was a CCP member.
We responded as follows:
- The regulations for WFOEs provide for dealing with employee unions. They do not deal with CCP matters.
- There is no formal law or regulation about the CCP’s role in the workplace. The constitution of the CCP provides that every workplace in which there are three or more party members employed should establish a basic CCP organization.
- Large SOEs (State Owned Entities) in China typically have a CCP organization in their business operations, but it is rare for private companies of any size to have any CCP organization and even rarer still for a WFOE.
- Large WFOEs in China are coming under increasing pressure to allow for CCP controlled labor unions. This is only common in large WFOEs with many line worker type employees. So far, we have not heard of this happening in any service business WFOE.
- Since the CCP rules China, regardless of the formal laws and regulations, if three or more CCP members seek to form a party organization within your WFOE, it is advisable to accede to their request. CCP participation in SOEs makes complete sense. CCP participation in private companies makes little sense. This is why the practice is generally reserved for SOEs.
What are you seeing out there?